Give It All Away the Right Way
There's been a lot of commotion about the Giving Pledge, but you need to get your kids involved long before you make such a decision about your assets.
BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS@TULLMAN
For years we've read about billionaires joining the Giving Pledge to eventually part
with large portions of their fortunes when they die. The tax avoidance
advantages of such a "charitable" strategy are rarely mentioned in
the self-congratulatory and aggrandizing PR announcements that trumpet these
"unselfish and wondrous" gestures. And, as far as I can tell,
no one has ever documented the actual transfers of any funds on the occasion of
any donor's eventual passing as opposed to the slavish attention afforded to
the flamboyant pledges.
In fairness, since the bulk of the pledge makers are still in
their prime (other than Warren Buffett, who may live forever, and Bill Gates,
who may have already made some very substantial transfers) and since their
largely tech-centric fortunes were still growing until the last year or two
(largely tax-free I might add) maybe we all need to be just a little more
patient about the prospects of the promises turning into something more
tangible.
More importantly, as far as I'm concerned, there's almost never a
quote or comment from the impacted kids of these gracious grandees even though
it's hard to imagine that these gestures typically reflect the children's
fondest hopes and dreams as well as those of their parents. I'm certain that,
once the tax matters were addressed, the kids would much rather be bequeathed
the money so that they could determine how that fortune would be gainfully
employed in their lifetimes rather than have its disposition dictated from the
grave by their folks. Our children may love us and judge us, but if we burden
and mortgage their futures, they'll never forgive us.01:53
And then there's the matter of whether the whole process is more
an expression of parental concern than of Dad and Mom's confidence in the kids'
aptitude, appetite for, and interest in philanthropy. In fact, if you asked
some of these Daddy donors (many of whom came from nothing and most of whom are
male) about their own motivations, objectives, and intentions, the frankest of
them would admit that they were more than a little anxious about just how
responsibly their children would deploy the family's fortune in the future.
Shrouds may not have pockets, and you can't actually take it with you, but
prudent parents still have plenty of angst about what they're likely to be
leaving behind.
These people - entrepreneurs through and through - are control
freaks by definition and by their very nature. It's clearly an attribute that's
responsible in part for their successes, but not one that's so easy to pass
along to their descendants. As a result, they want to do whatever they can to
design, direct, and secure their family legacies in their own lifetimes since
it's not clear that they trust their kids to do the same. The truth is
that it's not what you do for your children, but what you have taught them to
do for themselves that will make them successful human beings.
The Giving Pledge may be great and generous news
for the charities awaiting the donors' beneficence, but, in some ways, it's a
rude awakening for the kids. Half a blessing in some ways and a curse in
others. It's a somewhat perilous topic to raise with the kids, who may
well be running significant parts of the family businesses at the time or, just
as likely, to be off doing their own thing without the slightest interest in
ever running the store. Let's just say it doesn't pay in either case to piss
them off. At the same time, we owe it to our kids to let them know what we
truly believe, and if they differ with us, we owe it to them to be honest in
our discussions and disagreements with them.
Just to be abundantly clear, this is not a problem simply for
the richest tech bros and the crypto clowns who -- at least until
recently --had too much money to spend in several lifetimes. While the
scale of the problem may vary widely, it's still an issue and should be an
inevitable conversation for every parent with their family members. There's no
question that trust and estate planning conversations with relatives are even
more painful than explaining to Aunt Marge why you'd rather see her burning her
hard-earned cash with the yule log rather than sending her monthly
contributions to buy Trump's NFTs or to join his courageous fight against
election fraud. But the sooner you start to have these chats, the better
and easier they will become and the happier all concerned will be.
Here are the five most important things to keep in mind and
cover in the conversation -- after you tell them that you love them:
1. Make sure that they know
it's going to happen and when it will before it does.
Surprises are for birthday parties, not for business matters
where they are almost always asymmetrical and bearers of bad news. Find the
right time and setting and set aside enough time to really focus and properly
explain the deal and why you're doing it. Save plenty of time for questions.
2. Make sure that they know
they're going to be part of the entire process.
This isn't so much about not having them feel left out as it is
about giving them agency and a real role in the evaluation and decision-making
process, which is a powerful way to set them up for a lot of the
responsibilities coming their way down the line. This is the best and
cheapest financial education you'll ever provide for them.
3. Make sure that they know
the donees and the folks who run them.
An old adage from the investment advisory world is that you
don't want to meet your client's kids at the funeral. It works both ways.
Having them meet the team that will be working with your gifts is a great way
to introduce them to the charities, projects, and activities that you think are
valuable and worthwhile.
4. Make sure they know
that there will be plenty for them to give away, too.
Warren Buffett said it best: he was gonna give his kids
"enough money so that they would feel they could do anything, but not so
much that they could do nothing." This is far better than a friend of mine
who - when his kids asked about their trust funds - said: "Trust me, there
won't be any funds." Not the best way to kick off the conversation.
5. Make it a family affair
and an ongoing and regular annual process.
If there's a better bonding experience than shared giving, I'm
not sure what it would be. We want to give our kids roots and wings, but the
very best thing to give them is a concrete example of giving back.
Whatever you've created or built in your career will never be as
important or meaningful in the long run as your family and children and the
lives you've helped ready them for. You can't hug a career or laugh with a
promotion. The primary job isn't preparing the path for your kids, it's
preparing your kids for the path.